Tesla profits drop 55%, company says EV sales ‘under pressure’ from hybrids

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Tesla profits fell 55% to $1.13 billion in the first quarter from the same year-ago period as a protracted EV price-cutting strategy and “several unforeseen challenges” cut into the automaker’s bottom line.

Tesla reported revenue of $21.3 billion in the first quarter, a 9% drop from the first quarter of 2023. Analysts polled by Yahoo Finance expected earnings of $0.51 per share on $22.15 billion in revenue. Tesla reported operating income of $1.2 billion in the first quarter, a 54% decrease from the same year-ago period.

The company said in its Q1 earnings report that it experienced “numerous challenges” in the first quarter, including the Red Sea conflict and the arson attack at Gigafactory Berlin and the gradual ramp of the updated Model 3 at its factory in Fremont, California. Tesla also noted that global EV sales continue to be under pressure as many carmakers prioritize hybrids over EVs. On the upside, that hybrid approach has meant automakers continue to buy regulatory credits; Tesla earned $442 million in zero emissions tax credits in the first quarter.

“The EV adoption rate globally is under pressure and a lot of other auto manufacturers are pulling back on EVs and pursuing plug in hybrids instead,” Tesla CEO Elon Musk said in opening remarks on the earnings call. “We believe this is not the right strategy, and electric vehicles will ultimately dominate the market.”

Shares pop on future promises

The results, posted after markets closed Tuesday, sent shares up as much as 9% following the release as investors appeared to be more focused on Tesla’s forward-looking remarks about future products, including an upended product roadmap.

Despite the downward trend in profits, Tesla used the first-quarter report to focus on the future, namely about using AI to make advances in autonomy and the introduction of new products, including those built on a next-generation vehicle platform. The company spent $1.1 billion on research and development in the first quarter, a 49% increase from the same quarter in 2023.

Musk emphasized that despite the downward pressure, the company was focused on — and investing in — the future. Specifically, the company is accelerating work on a new vehicle lineup with production expected in early 2025, if not late this year, Musk said.

“These new vehicles, including more affordable models, will use aspects of the next-generation platform as well as aspects of our current platforms,” he said. “And we’ll be able to produce on the same manufacturing lines as our current vehicle lineup.”

The cost of price cuts

Tesla has seen EV sales grow over the past several years, topping out to a new record of 1.8 million vehicles in 2023. But the company’s profits have suffered thanks to repeated price cuts that started in late 2022.

While those price cuts did provide a temporary bump in sales, it hasn’t had a lasting effect. Tesla delivered 386,810 vehicles in the first quarter of 2024, down 20% from the 484,507 it delivered in the final quarter of 2023. This wasn’t just a quarter-over-quarter blip either; Tesla delivered 8.5%…

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